As a small business owner who is seeking financing, it is often difficult to determine what to look for in a business financing company. Particularly one that is best suitable for your specific funding needs. This is often a telltale sign that you’ve found a perfect fit. However, no matter how specific you funding needs may be, there are some general components that every good business financing firm should possess - and you should look out for them before signing on the dotted line. Some of these areas are explained in more detail below.
What Personal and Professional Resources Do You Have Access To?
Before determining which financing company is best for your company, you first need to determine your current financial situation. This will tell you what type of funders you will likely attract and what kind of financing you will likely qualify for. For example, if your credit score is good or excellent, and your business has shown financial trends that generate a monthly positive cash flow, and you already have some cash reserves, then your creditworthiness is higher than other businesses without these resources. You also do not appear to be a greater risk as other businesses without these resources as well. As a result, there's a better chance that you will qualify for better terms and rates. However, if you are just starting out, and your credit score is fair or poor, plus you have little to no cash reserves and low annual net profits, you will likely qualify for funding from different funders, but likely those with programs that offer higher interest rates and not so favorable terms, however.
So when thinking about the best fit for your business in terms of a business financing firm, you may want to take the above information into consideration beforehand.
Types of Business Loans
When doing an assessment of what your actual financing needs are, that will tell you what type of business loan you need as well. For example, if your cash is tied up in accounts receivables, then accounts receivable financing may be suitable for you. Or you may have commercial property and want to add a pool, if so, then you may want to approach pool financing companies. You may also be in need of an equipment loan, a loan that is needed to bridge the gap during slow periods if the majority of your sales are generated during peak seasons; or just for general operating purposes, then a line of credit, SBA or other business loans may be better suited for you and to help grow your business. Being armed with this information beforehand will allow you to narrow down your search efforts.
Rates, Repayment Terms and Loan Amount
Because you have performed an assessment of your current financial situation and your personal and professional resources, you should know whether or not you qualify for prime or subprime rates.
The repayment terms also tell you how long you have to pay on a loan after the funds have been received. This may have a lot to do with your creditworthiness along with the amount of the loan and your relationship with the lender.
The amount of the loan should be based on what you need the funds for, however.
Being armed with this information in advance will allow you to make a more informed decision about the type of financing company that is the best fit for you.
Additionally, you want to consider what type of documentation is required as well, such as financial statements, bank statements, business plans or other requirements before approaching business finance companies as well.